H.B. Fuller Reports Fourth Quarter and Fiscal Year 2024 Results

ST. PAUL, Minn.--(BUSINESS WIRE)--H.B. Fuller Company (NYSE: FUL) today reported financial results for its fourth quarter and fiscal year that ended November 30, 2024. Fiscal Year 2024 Noteworthy Items: Net revenue was $3.57 billion, up 1.6% year-on-year; organic revenue decreased 1.0% year-on-year, driven by 2.7% unfavorable pricing, partially offset by 1.7% higher volume; Gross margin was 29.8%; adjusted gross margin of 30.3% increased 90 basis points year-on-year, driven by pricing and raw material cost actions, higher volume, and restructuring benefits; Net income was $130 million; adjusted EBITDA was $594 million, up 2.2% year-on-year; adjusted EBITDA margin expanded year-on-year to 16.6%; Reported EPS (diluted) was $2.30; adjusted EPS (diluted) was $3.84, effectively flat versus the prior year as higher adjusted EBITDA was offset by higher amortization expense; Net working capital, as a percentage of annualized net revenue, declined 160 basis points year-on-year to 14.5%; cash flow from operations was $301 million. Fourth Quarter 2024 Noteworthy Items: Net revenue was $923 million, up 2.3% year-on-year, with organic sales down 0.2% year-on-year; Gross margin was 28.7%; adjusted gross margin of 29.6% decreased year-on-year driven by unfavorable raw material cost developments and delayed price realization; Net income/(loss) was ($7) million including an unfavorable $38 million non-cash, after-tax impact related to the Flooring divestiture; adjusted EBITDA was $148 million, down 14% year-on-year, and adjusted EBITDA margin was 16.1%; Reported EPS (diluted) was ($0.13); adjusted EPS (diluted) was $0.92, down versus the prior year, driven by lower operating income; Subsequent to quarter end, realigned building and construction market segments into the newly named Building Adhesive Solutions (BAS) global business unit (starting in fiscal 2025) and divested the Flooring market segment; Subsequent to quarter end, expanded the geographic reach and technology offering of our Medical Adhesive Technology market segment with the announced acquisitions of GEM S.r.l. and Medifill Ltd; Finalizing an expanded plan to streamline manufacturing and supply chain footprint and cost structure, which is expected to generate additional annualized pre-tax cost savings of approximately $75 million when completed by fiscal 2030. Summary of Fourth Quarter 2024 Results: The Company’s net revenue for the fourth quarter of fiscal 2024 was $923 million, up 2.3% versus the fourth quarter of fiscal 2023. Organic revenue declined 0.2% year-on-year, with pricing adjustments reducing organic revenue by 1.5% and volume increasing organic revenue by 1.3%. Foreign currency translation decreased net revenue by 0.2%, and acquisitions increased net revenue by 2.7%. Gross profit in the fourth quarter of fiscal 2024 was $265 million. Adjusted gross profit was $273 million. Adjusted gross profit margin of 29.6% decreased 170 basis points year-on-year. Unfavorable pricing in conjunction with higher raw material costs, principally led to the decline in adjusted gross margin year-on-year. Selling, general and administrative (SG&A) expense was $188 million in the fourth quarter of fiscal 2024 and adjusted SG&A was $174 million, up 12 percent year-on-year. The impact of acquisitions and higher variable compensation drove most of the year-on-year increase in adjusted SG&A. Net income/(loss) attributable to H.B. Fuller for the fourth quarter of fiscal 2024 was ($7) million, including an unfavorable $38 million non-cash, after-tax impact related to the Flooring divestiture. Adjusted net income attributable to H.B. Fuller for the fourth quarter of fiscal 2024 was $52 million. Adjusted EPS was $0.92 per diluted share. Adjusted EBITDA in the fourth quarter of fiscal 2024 was $148 million, down 14% year-on-year, driven by unfavorable raw material cost developments, delayed price realization, and higher variable compensation expense. “Overall, I am proud of the progress we made in fiscal year 2024. We continued to expand adjusted EBITDA margin and enhanced the profile of our portfolio through several strategic acquisitions and the divestiture of our Flooring business,” said Celeste Mastin, President and Chief Executive Officer. “At the same time, I am disappointed that we were unable to finish the year as strong as we had expected. In the fourth quarter, we encountered an unexpected deceleration in volume across the majority of our end markets. Furthermore, delays in customer order patterns, particularly in the consumer product goods related market segments, shifted price increase realization into fiscal 2025, delaying the offset of higher raw material costs and resulting in margin deterioration. “We are intensely focused on what we can control and have already begun executing additional pricing actions and cost controls to prudently prepare for a challenging volume growth environment in 2025. Our strategic plan to continue to evolve H.B Fuller into a higher growth, higher margin company remains on track on the timeline we originally communicated.” Balance Sheet and Working Capital: Net debt at the end of the fourth quarter of fiscal 2024 was $1,841 million, down $48 million sequentially versus the third quarter and up $182 million year-on-year. Net debt-to-adjusted EBITDA of 3.1X was flat versus the previous quarter. Net working capital in the fourth quarter of fiscal 2024 declined $56 million sequentially versus the third quarter and $46 million year-on-year. As a percentage of annualized net revenue, net working capital declined 160 basis points, both sequentially and year-on-year, to 14.5%. Manufacturing and Supply Chain Footprint Consolidation: The Company is finalizing an expanded plan to significantly reduce its global manufacturing footprint and streamline its North American planning and logistics structure. This multi-year plan is expected to reduce the number of manufacturing facilities from 82 today to a target of 55 when completed in 2030. Additionally, it will reduce the number of warehouses in North America from 55 today to approximately 10 by the end of 2027. As a result of these combined actions, the Company expects to generate approximately $75 million in annualized cost savings once the plan is fully implemented in fiscal 2030. These figures are incremental to the ongoing restructuring actions, which are still expected to generate annualized cost savings of $45 million by the end of fiscal 2025. The Company expects to invest approximately $150 million in incremental capital over the next five years associated with the expanded plan. “Our manufacturing footprint consolidation, coupled with our planning and logistics reorganization, are important steps in our strategic plan to achieve an EBITDA margin consistently greater than 20 percent. These actions will not only reduce costs through improved capacity utilization, they will also enable us to better serve our customers and reduce future capital expenditure requirements,” said Mastin. Fiscal 2025 Outlook: Net revenue growth for fiscal 2025 is expected to be down 2% to 4%, adjusting for the divestiture of the Flooring business, net revenue is expected to be up 1% to 2%; Organic revenue growth is expected to be flat to up 2% versus fiscal 2024; Adjusted EBITDA for fiscal 2025 is expected to be in the range of $600 million to $625 million, equating to growth of approximately 1% to 5% year-on-year; Adjusted EBITDA for the first quarter of 2025 is expected to be in the range of $105 million to $115 million; The core tax rate, excluding the impact of discrete items, is anticipated to be between 26% and 27% in fiscal year 2025; Net interest expense for fiscal 2025 is expected to be between $120 million and $125 million; Adjusted EPS (diluted) is expected to be in the range of $3.90 to $4.20, equating to a range of up 2% to 9% year-on-year; Operating cash flow in fiscal year 2025 is expected to be between $300 million and $325 million; Capital expenditures of approximately $160 million are expected in fiscal 2025, which includes approximately $40 million related to the Company’s manufacturing footprint consolidation initiative. Conference Call: The Company will hold a conference call on January 16, 2025, at 9:30 a.m. CT (10:30 a.m. ET) to discuss its results. Interested parties may listen to the conference call on a live webcast. The webcast, along with a supplemental presentation, may be accessed from the Company’s website at https://investors.hbfuller.com. Participants must register prior to accessing the webcast using this link and should do so at least 10 minutes prior to the start of the call to install and test any necessary software and audio connections. A telephone replay of the conference call will be available from 12:30 p.m. CT on January 16, 2025, to 10:59 p.m. CT on January 23, 2025. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-609-800-9909, and enter Conference ID: 6370505. Regulation G: The information presented in this earnings release regarding consolidated and segment organic revenue growth, operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA margin, net debt, net debt-to-adjusted EBITDA, trailing twelve months adjusted EBITDA, net working capital, annualized net revenue and net working capital as a percentage of annualized net revenue does not conform to U.S. generally accepted accounting principles (U.S. GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported U.S. GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our Fiscal 2025 Outlook, which the Company cannot reconcile to forward-looking GAAP results without unreasonable effort. About H.B. Fuller: As the largest pureplay adhesives company in the world, H.B. Fuller’s (NYSE: FUL) innovative, functional coatings, adhesives and sealants enhance the quality, safety and performance of products people use every day. Founded in 1887, with 2024 revenue of $3.6 billion, our mission to Connect What Matters is brought to life by more than 7,500 global team members who collaborate with customers across more than 30 market segments in over 140 countries to develop highly specified solutions that enable customers to bring world-changing innovations to their end markets. Learn more at www.hbfuller.com. Safe Harbor for Forward-Looking Statements: Certain statements in this press release may be considered forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases. These statements are subject to various risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the availability and pricing of raw materials; the impact of potential cybersecurity attacks and security breaches; failures in our information technology systems; the impact on the supply chain, raw material costs and pricing of our products due to military conflict, including between Russia and Ukraine and in the Middle East; the impact on our margins and product demand due to inflationary pressures; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance our debt or to incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, and the effect of debt covenants that limit the discretion of management in operating the business or in paying dividends; our ability to pay dividends and to pursue growth opportunities if we continue to pay dividends according to our current dividend policy; our ability to effectively manage and realize expected benefits from completed and future mergers, acquisitions, and divestitures; our ability to achieve expected synergies, cost savings and operating efficiencies from our restructuring initiatives and operational improvement projects within the expected time frames or at all; our ability to effectively implement Project ONE; uncertain political and economic conditions; fluctuations in product demand; competing products and pricing; our geographic and product mix; disruptions to our relationships with our major customers and suppliers; regulatory compliance across our global footprint; trade policies and economic sanctions impacting our markets; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and investigations, including for product liability and environmental matters; impairment charges on our goodwill or long-lived assets; the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Additional information about these various risks and uncertainties can be found in the “Risk Factors” section of our Form 10-K filings, and any updates to the risk factors in our Form 10-Q and 8-K filings with the SEC, but there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on the business. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by law. H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Three Months Ended Three Months Ended November 30, 2024 Percent of Net Revenue December 2, 2023 Percent of Net Revenue Net revenue $ 923,284 100.0 % $ 902,879 100.0 % Cost of sales (658,424 ) (71.3 )% (629,037 ) (69.7 )% Gross profit 264,860 28.7 % 273,842 30.3 % Selling, general and administrative expenses (188,453 ) (20.4 )% (160,440 ) (17.8 )% Other income, net (44,396 ) (4.8 )% 4,918 0.5 % Interest expense (33,621 ) (3.6 )% (33,297 ) (3.7 )% Interest income 1,084 0.1 % 1,217 0.1 % Income before income taxes and income from equity method investments (526 ) (0.1 )% 86,240 9.6 % Income taxes (7,885 ) (0.9 )% (42,274 ) (4.7 )% Income from equity method investments 1,159 0.1 % 1,036 0.1 % Net income including non-controlling interest (7,252 ) (0.8 )% 45,002 5.0 % Net income attributable to non-controlling interest (107 ) (0.0 )% (11 ) (0.0 )% Net income attributable to H.B. Fuller $ (7,359 ) (0.8 )% $ 44,991 5.0 % Basic income per common share attributable to H.B. Fuller $ (0.13 ) $ 0.83 Diluted income per common share attributable to H.B. Fuller $ (0.13 ) $ 0.80 Weighted-average common shares outstanding: Basic 55,106 54,491 Diluted 56,658 56,161 H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Year Ended Year Ended November 30, 2024 Percent of Net Revenue December 2, 2023 Percent of Net Revenue Net revenue $ 3,568,736 100.0 % $ 3,510,934 100.0 % Cost of sales (2,506,859 ) (70.2 )% (2,502,037 ) (71.3 )% Gross profit 1,061,877 29.8 % 1,008,897 28.7 % Selling, general and administrative expenses (713,657 ) (20.0 )% (653,760 ) (18.6 )% Other income, net (37,115 ) (1.0 )% 9,682 0.3 % Interest expense (133,124 ) (3.7 )% (134,602 ) (3.8 )% Interest income 4,682 0.1 % 3,943 0.1 % Income before income taxes and income from equity method investments 182,663 5.1 % 234,160 6.7 % Income taxes (56,381 ) (1.6 )% (93,529 ) (2.7 )% Income from equity method investments 4,113 0.1 % 4,357 0.1 % Net income including non-controlling interest 130,395 3.7 % 144,988 4.1 % Net income attributable to non-controlling interest (139 ) (0.0 )% (82 ) (0.0 )% Net income attributable to H.B. Fuller $ 130,256 3.6 % $ 144,906 4.1 % Basic income per common share attributable to H.B. Fuller $ 2.37 $ 2.67 Diluted income per common share attributable to H.B. Fuller $ 2.30 $ 2.59 Weighted-average common shares outstanding: Basic 54,932 54,332 Diluted 56,629 55,958 H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended November 30, December 2, November 30, December 2, 2024 2023 2024 2023 Net income attributable to H.B. Fuller $ (7,359 ) $ 44,991 $ 130,256 $ 144,906 Adjustments: Acquisition project costs 1 4,051 4,765 11,035 16,874 Organizational realignment 2 15,958 10,549 39,996 29,900 Project One 3 2,672 2,193 11,885 9,815 Business divestiture 4 47,267 - 47,267 - Other 5 39 (3,903 ) (1,981 ) (611 ) Discrete tax items 6 (1,322 ) 16,955 (5,469 ) 26,085 Income tax effect on adjustments 7 (9,339 ) (1,158 ) (15,811 ) (10,604 ) Adjusted net income attributable to H.B. Fuller 8 51,967 74,392 217,178 216,365 Add: Interest expense 33,621 33,297 133,122 131,913 Interest income (1,084 ) (1,217 ) (4,679 ) (3,943 ) Income taxes 18,546 26,477 77,661 78,047 Depreciation and Amortization expense 9 45,286 39,653 170,573 158,456 Adjusted EBITDA 8 148,336 172,602 593,855 580,838 Diluted Shares 56,658 56,161 56,629 55,958 Adjusted diluted income per common share attributable to H.B. Fuller 8 $ 0.92 $ 1.32 $ 3.84 $ 3.87 Adjusted net revenue $ 923,284 $ 902,879 $ 3,568,736 $ 3,510,934 Adjusted EBITDA margin 8 16.1 % 19.1 % 16.6 % 16.5 % 1 Acquisition project costs include costs related to evaluating, acquiring and integrating business acquisitions. Acquisition project costs include $4,583 and $1,421 in transaction costs (primarily consulting and professional fees, representations and warranties insurance premiums and employee acquisition-related travel expenses) and ($532) and $1,489 in purchase accounting costs (primarily professional fees for valuation services, inventory step-up cost and the impact of changes to contingent consideration liabilities after the completion of the purchase price allocation) and $0 and $1,855 in business integration costs (primarily costs of transition services agreements) for the three months ended November 30, 2024 and December 2, 2023, respectively. Acquisition project costs include $9,718 and $6.960 in transaction costs (primarily consulting and professional fees, representations and warranties insurance premiums and employee acquisition related travel expenses), $740 and $7,712 in purchase accounting costs (primarily professional fees for valuation services, inventory step-up cost and the impact of changes to contingent consideration liabilities after the completion of the purchase price allocation) and $577 and $2,202 in business integration costs (primarily costs of transition services agreements and for the three months ended March 2, 2024 and the twelve months ended December 2, 2023, retention bonuses paid to employees of the acquired entities) for the years ended November 30, 2024 and December 2, 2023, respectively. 2 Organizational realignment includes costs incurred as a direct result of the organizational realignment program, including professional fees related to legal entity and business structure changes, employee retention and severance costs, and facility rationalization costs related to the closure of production facilities and consolidation of business activities. Facility rationalization costs include plant closure costs, the impact of accelerated depreciation, and for the three months ended March 2, 2024 and the twelve months ended December 2, 2023, operational inefficiencies. Organizational realignment includes $2,169 and $812 in professional fees related to legal entity and business structure changes, $6,832 and $8,110 in employee severance and other related costs, and $6,957 and $1,627 related to facility rationalization costs for the three months ended November 30, 2024 and December 2, 2023, respectively. Organizational realignment includes $9,084 and $1,525 in professional fees related to legal entity and business structure changes, $16,553 and $25,490 in employee severance and other related costs, and $14,359 and $2,885 related to facility rationalization costs for the year ended November 30, 2024 and December 2, 2023, respectively. 3 Project One includes non-capitalizable project costs related implementing our global Enterprise Resource Planning system, including upgrading to SAP S/4HANA®, which will upgrade and standardize our information system. 4 Business divestiture for the three months and year ended November 30, 2024 includes impairment losses for goodwill and long-lived assets, and project costs incurred as a direct result of the pending sale of the North America Flooring business, which is a component of our Construction Adhesives operating segment. Impairment losses represent the difference between the book value of the assets held for sale and their net realizable value. 5 Other includes a gain from insurance recoveries and a loss from the write-off of a cost method investment for the year ended November 30, 2024. 6 Discrete tax items for the three months ended November 30, 2024 are related to various foreign tax matters and for the year ended November 30, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months and year ended December 2, 2023 are related to the tax impact of withholding tax recorded on earnings that are no longer permanently reinvested, as well as other various U.S. and foreign tax matters. 7 The income tax effect on adjustments represents the difference between income taxes on net income before income taxes and income from equity method investments reported in accordance with U.S. GAAP and adjusted net income before income taxes and income from equity method investments. 8 Adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted net income attributable to H.B. Fuller is defined as net income before the specific adjustments shown above. Adjusted diluted income per common share is defined as adjusted net income attributable to H.B. Fuller divided by the number of diluted common shares. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization and the specific adjustments shown above. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. The table above provides a reconciliation of adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B. Fuller, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. 9 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller totaling ($711) and ($1,036) for the three months ended November 30, 2024 and December 2, 2023, respectively and ($4,137) and ($1,384) for the year ended November 30, 2024 and December 2, 2023, respectively. H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION In thousands (unaudited) Three Months Ended Year Ended November 30, December 2, November 30, December 2, 2024 2023 2024 2023 Net Revenue: Hygiene, Health and Consumable Adhesives $ 395,693 $ 411,085 $ 1,546,351 $ 1,601,487 Engineering Adhesives 381,931 365,735 1,459,137 1,428,744 Construction Adhesives 145,660 126,059 563,248 480,703 Corporate unallocated - - - - Total H.B. Fuller $ 923,284 $ 902,879 $ 3,568,736 $ 3,510,934 Segment Operating Income: Hygiene, Health and Consumable Adhesives $ 40,266 $ 65,614 $ 187,413 $ 215,088 Engineering Adhesives 53,516 57,539 193,038 187,346 Construction Adhesives 4,962 3,772 25,304 5,961 Corporate unallocated (22,336 ) (13,523 ) (57,535 ) (53,258 ) Total H.B. Fuller $ 76,408 $ 113,402 $ 348,220 $ 355,137 Adjusted EBITDA 8 Hygiene, Health and Consumable Adhesives $ 54,969 $ 81,677 $ 246,762 $ 275,802 Engineering Adhesives 75,153 74,020 270,286 255,778 Construction Adhesives 17,888 15,933 75,201 55,517 Corporate unallocated 326 972 1,606 (6,259 ) Total H.B. Fuller $ 148,336 $ 172,602 $ 593,855 $ 580,838 Adjusted EBITDA Margin 8 Hygiene, Health and Consumable Adhesives 13.9 % 19.9 % 16.0 % 17.2 % Engineering Adhesives 19.7 % 20.2 % 18.5 % 17.9 % Construction Adhesives 12.3 % 12.6 % 13.4 % 11.5 % Corporate unallocated NMP NMP NMP NMP Total H.B. Fuller 16.1 % 19.1 % 16.6 % 16.5 % NMP = non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended November 30, December 2, November 30, December 2, 2024 2023 2024 2023 Income before income taxes and income from equity method investments $ (526 ) $ 86,240 $ 182,663 $ 234,160 Adjustments: Acquisition project costs 1 4,051 4,765 11,035 16,874 Organizational realignment 2 15,958 10,549 39,996 29,900 Project One 3 2,672 2,193 11,885 9,815 Business divestiture 4 47,267 - 47,267 - Other 5 39 (3,903 ) (1,981 ) (611 ) Adjusted income before income taxes and income from equity method investments 10 $ 69,461 $ 99,844 $ 290,865 $ 290,138 10 Adjusted income before income taxes and income from equity investments is a non-GAAP financial measure. Adjusted income before income taxes and income from equity investments is defined as income before income taxes and income from equity investments before the specific adjustments shown above. The table above provides a reconciliation of adjusted income before income taxes and income from equity investments to income before income taxes and income from equity investments, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended November 30, December 2, November 30, December 2, 2024 2023 2024 2023 Income Taxes $ (7,885 ) $ (42,274 ) $ (56,381 ) $ (93,529 ) Adjustments: Acquisition project costs 1 (77 ) (405 ) (1,125 ) (3,127 ) Organizational realignment 2 (305 ) (898 ) (4,350 ) (5,206 ) Project One 3 (51 ) (187 ) (1,669 ) (1,848 ) Business divestiture 4 (8,905 ) - (8,905 ) - Other 5 (1 ) 332 238 (422 ) Discrete tax items 6 (1,322 ) 16,955 (5,469 ) 26,085 Adjusted income taxes 11 $ (18,546 ) $ (26,477 ) $ (77,661 ) $ (78,047 ) Adjusted income before income taxes and income from equity method investments $ 69,461 $ 99,844 $ 290,865 $ 290,138 Adjusted effective income tax rate 11 26.7 % 26.5 % 26.7 % 26.9 % 11 Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. Adjusted income taxes is defined as income taxes before the specific adjustments shown above. Adjusted effective income tax rate is defined as income taxes divided by adjusted income before income taxes and income from equity method investments. The table above provides a reconciliation of adjusted income taxes and adjusted effective income tax rate to income taxes, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended Year Ended November 30, December 2, November 30, December 2, 2024 2023 2024 2023 Net revenue $ 923,284 $ 902,879 $ 3,568,736 $ 3,510,934 Gross profit $ 264,860 $ 273,842 $ 1,061,877 $ 1,008,897 Gross profit margin 28.7 % 30.3 % 29.8 % 28.7 % Adjustments: Acquisition project costs 1 1 529 1,001 3,146 Organizational realignment 2 8,035 8,136 18,714 18,108 Project ONE 3 24 223 37 223 Other 5 - 52 (1 ) 530 Adjusted gross profit 12 $ 272,920 $ 282,782 $ 1,081,628 $ 1,030,904 Adjusted gross profit margin 12 29.6 % 31.3 % 30.3 % 29.4 % 12 Adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit and adjusted gross profit margin is defined as gross profit and gross profit margin excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted gross profit and gross profit margin to gross profit and gross profit margin, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended Year Ended November 30, December 2, November 30, December 2, 2024 2023 2024 2023 Selling, general and administrative expenses $ (188,453 ) $ (160,440 ) $ (713,657 ) $ (653,760 ) Adjustments: Acquisition project costs 1 4,558 4,236 10,519 13,831 Organizational realignment 2 7,031 2,333 19,354 11,712 Project ONE 3 2,648 1,969 11,847 9,592 Other 5 41 (3,954 ) (3,946 ) (3,882 ) Adjusted selling, general and administrative expenses 13 $ (174,175 ) $ (155,856 ) $ (675,883 ) $ (622,507 ) 13 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended: Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller November 30, 2024 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 41,767 $ 54,564 $ 6,393 $ 102,724 $ (110,083 ) $ (7,359 ) Adjustments: Acquisition project costs 1 - - - - 4,051 4,051 Organizational realignment 2 - - - - 15,958 15,958 Project One 3 - - - - 2,672 2,672 Business divestiture 4 - - - - 47,267 47,267 Other 5 39 39 Discrete tax items 6 - - - - (1,322 ) (1,322 ) Income tax effect on adjustments 7 - - - - (9,339 ) (9,339 ) Adjusted net income attributable to H.B. Fuller 8 41,767 54,564 6,393 102,724 (50,757 ) 51,967 Add: Interest expense - - - - 33,621 33,621 Interest income - - - - (1,084 ) (1,084 ) Income taxes - - - - 18,546 18,546 Depreciation and amortization expense 9 13,202 20,589 11,495 45,286 - 45,286 Adjusted EBITDA 8 $ 54,969 $ 75,153 $ 17,888 $ 148,010 $ 326 $ 148,336 Adjusted net revenue $ 395,693 $ 381,931 $ 145,660 $ 923,284 - $ 923,284 Adjusted EBITDA margin 8 13.9 % 19.7 % 12.3 % 16.0 % NMP 16.1 % Year Ended Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller November 30, 2024 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 193,403 $ 197,245 $ 31,028 $ 421,676 $ (291,420 ) $ 130,256 Adjustments: - Acquisition project costs 1 - - - - 11,035 11,035 Organizational realignment 2 - - - - 39,996 39,996 Project One 3 - - - - 11,885 11,885 Business divestiture 4 - - - - 47,267 47,267 Other 5 (1,981 ) (1,981 ) Discrete tax items 6 - - - - (5,469 ) (5,469 ) Income tax effect on adjustments 7 - - - - (15,811 ) (15,811 ) Adjusted net income attributable to H.B. Fuller 8 193,403 197,245 31,028 421,676 (204,498 ) 217,178 Add: Interest expense - - - - 133,122 133,122 Interest income - - - - (4,679 ) (4,679 ) Income taxes - - - - 77,661 77,661 Depreciation and amortization expense 9 53,359 73,041 44,173 170,573 - 170,573 Adjusted EBITDA 8 $ 246,762 $ 270,286 $ 75,201 $ 592,249 $ 1,606 $ 593,855 Adjusted net revenue 1,546,351 1,459,137 563,248 $ 3,568,736 - 3,568,736 Adjusted EBITDA margin 8 16.0 % 18.5 % 13.4 % 16.6 % NMP 16.6 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended: Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 2, 2023 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 67,438 $ 58,857 $ 5,682 $ 131,977 $ (86,986 ) $ 44,991 Adjustments: Acquisition project costs 1 - - - - 4,765 4,765 Organizational realignment 2 - - - - 10,549 10,549 Project One 3 - - - - 2,193 2,193 Other 5 - - - - (3,903 ) (3,903 ) Discrete tax items 6 - - - - 16,955 16,955 Income tax effect on adjustments 7 - - - - (1,158 ) (1,158 ) Adjusted net income attributable to H.B. Fuller 8 67,438 58,857 5,682 131,977 (57,585 ) 74,392 Add: Interest expense - - - - 33,297 33,297 Interest income - - - - (1,217 ) (1,217 ) Income taxes - - - - 26,477 26,477 Depreciation and amortization expense 9 14,239 15,163 10,251 39,653 - 39,653 Adjusted EBITDA 8 $ 81,677 $ 74,020 $ 15,933 $ 171,630 $ 972 $ 172,602 Adjusted net revenue $ 411,085 $ 365,735 $ 126,059 $ 902,879 - $ 902,879 Adjusted EBITDA margin 8 19.9 % 20.2 % 12.6 % 19.0 % NMP 19.1 % Year Ended Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 2, 2023 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 222,404 $ 192,635 $ 13,602 $ 428,641 $ (283,735 ) $ 144,906 Adjustments: Acquisition project costs 1 - - - - 16,874 16,874 Organizational realignment 2 - - - - 29,900 29,900 Project One 3 - - - - 9,815 9,815 Other 5 - - - - (611 ) (611 ) Discrete tax items 6 - - - - 26,085 26,085 Income tax effect on adjustments 7 - - - - (10,604 ) (10,604 ) Adjusted net income attributable to H.B. Fuller 8 222,404 192,635 13,602 428,641 (212,276 ) 216,365 Add: Interest expense - - - - 131,913 131,913 Interest income - - - - (3,943 ) (3,943 ) Income taxes - - - - 78,047 78,047 Depreciation and amortization expense 9 53,398 63,143 41,915 158,456 - 158,456 Adjusted EBITDA 8 $ 275,802 $ 255,778 $ 55,517 $ 587,097 $ (6,259 ) $ 580,838 Adjusted net revenue $ 1,601,487 $ 1,428,744 $ 480,703 $ 3,510,934 - $ 3,510,934 Adjusted EBITDA margin 8 17.2 % 17.9 % 11.5 % 16.7 % NMP 16.5 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION NET REVENUE GROWTH (DECLINE) (unaudited) Net revenue growth versus 2023 Three Months Ended Year Ended November 30, 2024 November 30, 2024 Price (1.5 )% (2.7 )% Volume 1.3 % 1.7 % Organic Growth 14 (0.2 )% (1.0 )% M&A 2.7 % 3.6 % Constant Currency 2.5 % 2.6 % F/X (0.2 )% (1.0 )% Total H.B. Fuller Net Revenue Growth 2.3 % 1.6 % Net revenue growth versus 2023 Three Months Ended November 30, 2024 Net Constant Organic Revenue F/X Currency M&A Growth 14 Hygiene, Health and Consumable Adhesives (3.7 )% (1.5 )% (2.2 )% 0.0 % (2.2 )% Engineering Adhesives 4.4 % 1.0 % 3.4 % 5.3 % (1.9 )% Construction Adhesives 15.5 % 0.8 % 14.7 % 4.2 % 10.5 % Total H.B. Fuller 2.3 % (0.2 )% 2.5 % 2.7 % (0.2 )% Net revenue growth versus 2023 Year Ended November 30, 2024 Net Constant Organic Revenue F/X Currency M&A Growth 14 Hygiene, Health and Consumable Adhesives (3.4 )% (1.7 )% (1.7 )% 2.3 % (4.0 )% Engineering Adhesives 2.1 % (0.6 )% 2.7 % 3.7 % (1.0 )% Construction Adhesives 17.2 % 0.2 % 17.0 % 7.5 % 9.5 % Total H.B. Fuller 1.6 % (1.0 )% 2.6 % 3.6 % (1.0 )% 14 We use the term “organic revenue” to refer to net revenue, excluding the effect of foreign currency changes and acquisitions and divestitures. Organic growth reflects adjustments for the impact of period-over-period changes in foreign currency exchange rates on revenues and the revenues associated with acquisitions and divestitures. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Trailing Twelve Three Months Ended Months17 Ended Year Ended December 2, 2023 March 2, 2024 June 1, 2024 August 31, 2024 August 31, 2024 November 30, 2024 December 2, 2023 Net income attributable to H.B. Fuller $ 44,991 $ 30,991 $ 51,264 $ 55,361 $ 182,607 $ 130,256 $ 144,906 Adjustments: Acquisition project costs 1 4,765 2,043 1,467 3,474 11,749 11,035 16,874 Organizational realignment 2 10,549 7,262 7,275 9,471 34,557 39,996 29,900 Project One 3 2,193 3,213 2,845 3,154 11,405 11,885 9,815 Business divestiture 4 - - - - - 47,267 - Other 5 (3,903 ) - 914 (2,904 ) (5,893 ) (1,981 ) (611 ) Discrete tax items 15 16,955 (2,527 ) 1,317 (2,937 ) 12,808 (5,469 ) 26,085 Income tax effect on adjustments 5 (1,158 ) (3,290 ) (1,558 ) (1,624 ) (7,630 ) (15,811 ) (10,604 ) Adjusted net income attributable to H.B. Fuller 8 74,392 37,692 63,524 63,995 239,603 217,178 216,365 Add: Interest expense 33,297 31,901 32,313 35,287 132,798 133,122 131,913 Interest income (1,217 ) (1,307 ) (1,197 ) (1,090 ) (4,812 ) (4,679 ) (3,943 ) Adjusted Income taxes 26,477 13,631 22,658 22,825 85,591 77,661 78,047 Depreciation and Amortization expense 16 39,653 41,101 39,952 44,235 164,941 170,573 158,456 Adjusted EBITDA 8 $ 172,602 $ 123,018 $ 157,250 $ 165,252 $ 618,122 $ 593,855 $ 580,838 15 Discrete tax items for the three months ended March 2, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months ended June 1, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months ended August 31, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months ended November 30, 2024 are related to various foreign tax matters and for the year ended November 30, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months and year ended December 2, 2023 are related to the tax impact of withholding tax recorded on earnings that are no longer permanently reinvested, as well as other various U.S. and foreign tax matters. 16 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller. Depreciation and amortization expense added back was ($1,036) for the three months ended December 2, 2023, ($2,422) for the three months ended March 2, 2024, ($1,198) for the three months ended June 1, 2024, $194 for the three months ended August 31, 2024, ($4,137) for the year ended November 30, 2024 and ($1,384) for the year ended December 2, 2023. 17 Trailing twelve months adjusted EBITDA is a non-GAAP financial measure and is defined as adjusted EBITDA for the twelve-month period ended on the date presented. The table above provides a reconciliation of trailing twelve month adjusted EBITDA to net income attributable to H.B. Fuller for the trailing twelve-month period presented, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) August 31, 2024 November 30, 2024 December 2, 2023 Total debt $ 2,021,070 $ 2,010,640 $ 1,838,431 Less: Cash and cash equivalents 131,412 169,352 179,453 Net debt18 $ 1,889,658 $ 1,841,288 $ 1,658,978 Trailing twelve months 18 / Year ended Adjusted EBITDA $ 618,122 $ 593,855 580,838 Net Debt-to-Adjusted EBITDA18 3.1 3.1 2.9 18 Net debt and net debt-to-adjusted EBITDA are non-GAAP financial measures. Net debt is defined as total debt less cash and cash equivalents. Net debt-to-adjusted EBITDA is defined as net debt divided by trailing twelve months adjusted EBITDA. The calculations of these non-GAAP financial measures are shown in the table above. The table above provides a reconciliation of each of these non-GAAP financial measures to total debt, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) August 31, 2024 November 30, 2024 December 2, 2023 Trade receivables, net $ 574,781 $ 558,336 $ 577,932 Inventory 509,029 467,498 442,040 Trade payables 493,550 491,435 439,700 Net working capital19 $ 590,260 $ 534,399 $ 580,272 Net revenue three months ended $ 917,927 $ 923,284 $ 902,879 Annualized net revenue19 3,671,708 3,693,137 3,611,516 Net working capital as a percentage of annual net revenue19 16.1 % 14.5 % 16.1 % 19 Net working capital, annualized net revenue and net working capital as a percentage of annualized net revenue are non-GAAP financial measures. Net working capital is defined as trade receivables, net plus inventory less trade payables. Annualized net revenue is defined as net revenue for the three months ended on the date presented multiplied by four. Net working capital as a percentage of annualized net revenue is net working capital divided by annualized net revenue. The calculations of these non-GAAP financial measures are shown in the table above. The table above provides a reconciliation of each of these non-GAAP financial measures to the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. CONSOLIDATED BALANCE SHEETS H.B. Fuller Company and Subsidiaries (In thousands, except share and per share amounts) November 30, December 2, 2024 2023 Assets Current assets: Cash and cash equivalents $ 169,352 $ 179,453 Trade receivables, net 558,336 577,932 Inventories 467,498 442,040 Other current assets 104,019 112,678 Total current assets 1,299,205 1,312,103 Property, plant and equipment, net 881,927 824,655 Goodwill 1,532,221 1,486,512 Other intangibles, net 770,226 729,140 Other assets 449,665 371,165 Total assets $ 4,933,244 $ 4,723,575 Liabilities, non-controlling interest and total equity Current liabilities: Notes payable $ 587 $ 1,841 Trade payables 491,435 439,700 Accrued compensation 106,005 95,680 Income taxes payable 24,225 47,688 Other accrued expenses 97,038 107,902 Total current liabilities 719,290 692,811 Long-term debt, net of current maturities 2,010,052 1,836,590 Accrued pension liabilities 51,755 50,189 Other liabilities 322,299 388,072 Total liabilities 3,103,396 2,967,662 Commitments and contingencies (Note 14) Equity: H.B. Fuller stockholders' equity: Preferred stock (no shares outstanding) Shares authorized – 10,045,900 - - Common stock, par value $1.00 per share, Shares authorized – 160,000,000, Shares outstanding – 54,657,103 and 54,092,987 for 2024 and 2023, respectively 54,657 54,093 Additional paid-in capital 322,636 301,485 Retained Earnings 1,924,761 1,842,507 Accumulated other comprehensive loss (473,395 ) (442,880 ) Total H.B. Fuller stockholders' equity 1,828,659 1,755,205 Non-controlling interest 1,189 708 Total equity 1,829,848 1,755,913 Total liabilities, non-controlling interest and total equity $ 4,933,244 $ 4,723,575 CONSOLIDATED STATEMENTS of CASH FLOWS H.B. Fuller Company and Subsidiaries (In thousands) Fiscal Years November 30, December 2, December 3, 2024 2023 2022 Cash flows from operating activities: Net income including non-controlling interest $ 130,395 $ 144,988 $ 180,407 Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: Depreciation 91,054 80,327 72,593 Amortization 83,656 79,514 74,383 Deferred income taxes (36,186 ) (25,114 ) (15,230 ) (Income) loss from equity method investments, net of dividends received (537 ) 1,259 (9 ) Foreign currency remeasurement 47,533 (28,011) 6,213 Loss on impairment of assets held for sale 47,267 - - Loss on impairment of cost method investment 1,966 - - Gain from insurance proceeds (6,064 ) (Gain) loss on disposal of assets (501 ) 59 (1,195 ) Share-based compensation 21,914 19,911 24,368 Pension and other postretirement benefit plan contributions (2,909 ) (4,346 ) (3,009 ) Pension and other postretirement benefit plan income (14,444 ) (18,591 ) (24,021 ) Debt issuance cost write-off - 2,689 - Loss on fair value adjustment on contingent consideration liabilities - 2,893 - Change in assets and liabilities, net of effects of acquisitions: Trade receivables, net 10,749 68,721 (24,753 ) Inventories (30,099 ) 72,576 (55,772 ) Other assets (55,274 ) (7,927 ) 46,499 Trade payables 47,915 (57,752 ) (22,629 ) Accrued compensation 12,653 (13,836 ) 1,135 Other accrued expenses 6,008 (3,070 ) 6,303 Income taxes payable (23,090 ) 41,190 (12,873 ) Other liabilities (30,762 ) 22,918 4,104 Net cash provided by operating activities 301,244 378,398 256,514 Cash flows from investing activities: Purchased property, plant and equipment (139,238 ) (119,137 ) (129,964 ) Purchased businesses, net of cash acquired (273,863 ) (205,093 ) (250,807 ) Proceeds from sale of property, plant and equipment 1,152 5,029 1,556 Proceeds from insurance recoveries 6,064 - - Cash received from government grant - - 3,928 Net cash used in investing activities (405,885 ) (319,201 ) (375,287 ) Cash flows from financing activities: Proceeds from issuance of long-term debt 1,932,900 2,233,300 335,000 Repayment of long-term debt (1,764,870 ) (2,126,450 ) (159,500 ) Payment of debt issue costs (3,493 ) (10,214 ) (600 ) Net (payment on) proceeds from notes payable (1,219 ) (28,674 ) 3,455 Dividends paid (47,598 ) (43,395 ) (39,207 ) Contingent consideration payment - (1,477 ) (5,000 ) Proceeds from stock options exercised 35,927 14,619 30,122 Repurchases of common stock (39,558 ) (2,567 ) (3,950 ) Net cash provided by financing activities 112,089 35,142 160,320 Effect of exchange rate changes on cash and cash equivalents (17,549 ) 5,204 (23,423 ) Net change in cash and cash equivalents (10,101 ) 99,543 18,124 Cash and cash equivalents at beginning of year 179,453 79,910 61,786 Cash and cash equivalents at end of year $ 169,352 $ 179,453 $ 79,910

H.B. Fuller Reports Fourth Quarter and Fiscal Year 2024 Results

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